Morgan Stanley's Optimistic 2026: U.S. Stocks Poised for Growth

Morgan Stanley predicts that U.S. stocks will surpass their international counterparts in 2026, backed by increased AI capital expenditures and favorable policy conditions. The S&P 500 is expected to rise by 16%, with small caps driving performance. Despite lingering uncertainties, EU equities will benefit from the broad U.S. recovery.

Morgan Stanley is optimistic about U.S. stock performance in 2026, predicting they will outshine global counterparts due to growing investments in AI and beneficial policy scenarios.

While recent years have seen market instability, largely attributed to trade uncertainties under U.S. President Donald Trump's administration, Morgan Stanley anticipates moderate global economic growth and disinflation next year.

The firm forecasts the S&P 500 index to reach 7,800 by the close of 2026, with robust earnings and AI-driven efficiencies enhancing U.S. small-cap stocks' performance. Simultaneously, European equities are expected to ride the wave of the U.S. recovery, despite domestic and international challenges.

(With inputs from agencies.)